Would Legalized Sports Betting Help States Get Out of the Hole?

Sun, Apr 8, 2018
by CapperTek

The Supreme Court is expected to rule soon on whether to allow legalized sports betting across the country, and many states are lining up at the gate to cash in on the possible tax revenue and job creation.

Millions of people regularly wager on college and professional games, from office pools to internet gambling to placing bets with a bookie. About $150 billion in sports bets are placed each year, according to estimates from American Gaming Association President Geoff Freeman.

Under a 1992 federal law, sports betting is only completely legal in Nevada and partially in several other states. The Supreme Court heard oral arguments in December in a case brought by New Jersey, which argued the federal law violates principles of states’ rights. A ruling could come as early as this month.

Some states that already have casinos and other types of legal gambling are doubling down, hoping that expanding into sports betting will bring additional tax revenue and boost a struggling gaming industry.

Five states have passed legislation to pave the way for sports betting, and this year at least 17 are considering bills related to such gambling, according to MultiState Associates Inc., a government relations firm that tracks bills in state legislatures. As of early April, state legislatures were considering at least 46 such bills.

Louisiana lawmakers, who face deep spending cuts when $1 billion in temporary tax measures expire this year, have two sports betting bills under consideration. Adding sports betting to the state’s horse-racing tracks would bring in needed revenue and create jobs, said Democratic state Rep. Major Thibaut, who sponsored a sports-betting bill.

Mr. Thibaut said the state should tax something many people are doing already, especially since Louisiana allows other forms of gambling.

“Do we want a piece of the pie? And do we want this to go on in a regulated way that we can have some control over?” he said.

But some in Louisiana and elsewhere think more gambling would be a mistake.

Gene Mills, president of the conservative Louisiana Family Forum, said the argument that sports betting should be allowed because the state already permits other gambling is like an obese diabetic deciding to eat more sugary food because they already do so anyway.

He said state legislatures should oppose it. “It’s not just morality, it’s responsibility,” he said.

Lucy Dadayan, a research scientist at the public policy think tank Rockefeller Institute of Government, said the gambling industry in the past has presented overly optimistic views of expanded gambling. Many states added more casino gambling after 2008 in an effort to create jobs and more tax revenue, but her research found that benefits were short-lived. People initially came for the novelty, “but it’s not sustainable and very quickly they deteriorate,” she said.

How much potential revenue states would draw from legalized sports betting is unclear.

In Nevada, sports betting only brings in about 2% of the state’s overall gaming revenue, said David Schwartz, director of the University of Nevada Las Vegas’s Center for Gaming Research. He cautioned that legalizing it nationally wouldn’t bring in enough tax revenue to significantly affect states’ budgets.

It also is not a stable revenue, as betting fluctuates widely depending how teams are doing in a particular season, Mr. Schwartz said. The gaming industry wants sports betting to expand because “it creates the impression of growth” for an industry that has struggled to return to its revenue levels before the recession, he said.

Mr. Freeman said sports betting would bring marginal tax revenue, but it would help the industry attract new customers. Gambling businesses in many states will “slowly fade away” if not allowed to add new attractions, he said.

“You have to empower them to modernize,” he said.

Mr. Freeman said states should tax sports betting at a low rate, because a higher tax would likely drive gamblers back to the illegal market. Tax rates will vary by state, but the gaming association considers 6.75% a workable rate, he said.

The current push to legalize sports betting began in 2011, when New Jersey voters approved a state constitutional amendment that legalized sports betting, in part to help struggling casinos in Atlantic City. But when the state passed the law in 2012, the National Collegiate Athletic Association, joined by pro sports leagues, said it violated the federal Professional and Amateur Sports Protection Act of 1992, which forbids sports betting except in a few states that were grandfathered in.

Former New Jersey Gov. Chris Christie, a Republican, led the fight for expanded sports betting. Current Gov. Phil Murphy, a Democrat, supports the effort, a spokesman said.

In Illinois, Democratic state Rep. Lou Lang estimates legalization probably would capture up to about half of the illegal betting. That could bring in annual tax revenue of as much as $50 million for the state, he said.

“It’s a fact, billions of dollars are being wagered by Illinois citizens illegally,” he said. “We need to recapture that.”